Oct. 3 (Bloomberg) -- The U.K.’s decision to stay outside
the euro area spared the nation three times more pain than the
gain it would’ve seen from joining the currency union, according
to a study by International Monetary Fund economists.

Under normal times, joining the euro would lower trade
costs and help boost a country’s welfare in the long run,
according to the report released yesterday in Washington. In a
financial crisis that sent interest rates to levels recently
seen in the euro region, the effect would be negative, it said.

“The welfare costs from an episode of financial turbulence
is more than three times the welfare gains derived from lower
trade costs,” Ruy Lama and Pau Rabanal wrote in the study,
which focused on the role played by trade and financial links in
the decision to join a monetary union. “This stark difference
in the results can help to rationalize the decision of the U.K.
to postpone the entry to the” monetary union, they wrote.

The U.K. has made it clear it doesn’t plan to adopt the
euro in the foreseeable future. More recently, it has stood
outside of Europe’s debt turmoil, pressing the countries that
use the euro to move toward a fiscal and banking union to save
the currency while refusing to take part in bailouts of stricken
economies.

“During tranquil times the model indicates substantial
benefits from adopting a currency, however under financial
turbulence the gains disappear and the appropriate regime is to
stay out of the” union, the authors wrote. The result of the
study “gives a rationale to emphasize policies of financial
stability and fiscal prudence in a monetary union,” they wrote.